margin account

A brokerage account that permits an investor to purchase securities on credit and to borrow on securities already in the account. Buying securities on credit and borrowing on securities are subject to standards established by the Federal Reserve and/or by the firm carrying the account. Interest is charged on any borrowed funds and only for the period of time that the loan is outstanding. Also called general account. Compare cash account. See also initial margin requirement, maintenance margin requirement.

Are there any advantages to opening a margin account as opposed to a cash account?

A margin account provides the flexibility to borrow funds using your securities as collateral. This can be an advantage if used properly. Funds from a margin loan can be used to purchase other securities, or they can be utilized for consumption. The risk is that a decrease in the market value of the account can create a "margin call," which requires the deposit of additional securities, the deposit of cash, or the liquidation of some securities held in the account.

George Riles, First Vice President and Resident Manager, Merrill Lynch, Albany, GA

Margin account.

Margin accounts are brokerage accounts that allow you a much wider range of transactions than cash accounts.

In a cash account you must pay for every purchase in full at the time of the transaction. In a margin account, you can buy on margin, sell short, and purchase certain types of derivative products.

Before you can open a margin account, however, you must satisfy the firm's requirements for margin transactions. You must also agree in writing to the terms of the account, and make a minimum deposit of at least $2,000 in cash or qualifying securities.

If you buy on margin or sell short, you pay interest on the cash or the value of the securities you borrow through your margin account and must eventually repay the loan.

Because both types of transactions use leverage, they offer the possibility of making a substantially larger profit than you could realize by using only your own money.

But because you must repay the loan plus interest even if you lose money on the investment, using a margin account also exposes you to more risk than a cash account.

In our July 23rd letter, we alerted you to the fact that Ahmed Hussein, a dissident member of the Quality Systems Board, and a shareholder in the company who has proposed a slate of director nominees to take over seven of the nine seats on our Board, pledged all of his shares of QSI as collateral in margin accounts in flagrant violation of QSI's insider trading policy.

The monthly report should include the quality, quantity and value of equities financed by margin trading and the finance percentage by the brokerage company, as well as the total liabilities of clients who have margin accounts.

Although the Company did not explicitly disclose the reason for Pedersen's resignation, the 8-K included a general discussion of the Company's policy prohibiting holders of at least 10% of ZAGG stock from engaging in speculative transactions involving ZAGG stock, such as holding those securities in a margin account.

FINRA determined that Scottrade allowed certain margin account customers who executed a high volume of trades to continue to trade after the value of their accounts fell below the minimum equity requirement.

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